The Dynamics of Online Hotel Prices and the EU Booking.Com Case

Abstract

This paper analyses the dynamics of hotel prices listed on Booking.com in the period 2014-16. This period is characterised by the most important antitrust decisions regarding the use of price parity clauses by online travel agencies (OTAs) in the EU. First, we document the dynamics of hotel prices on Booking.com in tourism regions of three EU member states: France, Italy, and Spain. The evidence suggests that prices decreased in 2015, the year in which the major antitrust decisions took place, whereas they bounced back in 2016. Second, we provide both a comprehensive explanation of the previous evidence and a rationalisation based on a theoretical model of the OTA sector. Overall, our overarching analysis of the price dynamics on Booking.com allows to explain both the impact of removing price parities and the possible response of the OTAs.